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What is better: to be self-employed or to create a society?

13 Enero, 2020

If you are an entrepreneur, this will be one of the most important questions you will ask yourself: Is it better to be self-employed or to form a partnership? If you have this question, then read on because we will give you the answer.

When you are entrepreneurial you can choose to be autonomous or to form a society. There are many types of societies. Your choice will depend on the conditions and the nature of your business or the type of activity it carries out, the number of partners, and the capital with which the company will be constituted. It is also important to take into account tax obligations or liability to third parties

Self-employed

In general, most people who are going to start in the world of entrepreneurship in Spain, are constituted as self-employed.

This is usually the most recommended way for a person who is going to carry out his or her activity without a partner and whose profits do not exceed 60,000 euros.

Among the advantages we find:

- Registering as a Self-Employed is easy.

- There are benefits for people who are starting out as self-employed, such as the flat rate of 60 euros in the Social Security.

- You don't have to declare your corporate tax. Only the Income Tax.

- You are not obliged to present your accounts, so they are cheaper.

One of the cons is that the liability is limited. And the self-employed must respond with their present and future personal assets, to any debt. Although the rule has changed, and establishes that the Habitual Housing is respected.

If you are an independent professional, or are starting a small business that does not require a large investment, then without doubt the most economical decision to take your first steps is to register as a self-employed person.

When is it better to create a company?

There are many types of companies. It is advisable to form one when two or more people want to associate to develop a business.

There are other significant factors that will help you decide whether to incorporate a company or not, or to change from self-employed to a company:

-When you have to make large investments. In fact, many banks will require you to be incorporated to provide a loan or grant.

- If you are self-employed and you are generating profits of over 45,000 euros per year, it is a good time to incorporate because you will pay less tax.

- If your business will generate a debt with banks or suppliers that is greater than its assets, it is advisable to incorporate as a company, because this will protect your personal assets.

- If one of your objectives is to have the Administration as a client, you will have to become a Company, this is because in many cases only companies can participate in the bidding processes.

- If you carry out different activities that are not related, then it is reasonable to separate them also legally.

Here is a brief explanation of the most common types of companies and legal forms and their main characteristics.